DEFINITION OF OUTSOURCING
Outsourcing is a business practice where a particular company will hire someone who does not work for their company such as another company or a freelancer to do particular tasks for them. Typically, tasks outsourced will be highly repetitive or specialized tasks such as calling long lists of names with a particular call script, accounting, programming, data entry, technical support, payment processing, or some other specialized task.

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REASONS FOR OUTSOURCING
The reason companies outsource work to other companies are multi-fold. One reason could be to:

Save Time — so that employees and management can focus more on the core competencies of the company such as selling widgets while outsourcing bookeeping and reminder calls to companies who specialize in those particular tasks. Another reason could be:

Cost Cutting — Many outsource companies are located in India, The Philippines, or Eastern Europe where labor costs are lower than the United States, hence, creating an opportunity to capitalize on less expensive labor.

Skill Optimization — is yet another reason to outsource work as outsourced companies specialize in particular tasks such as blog set up, eCommerce site creation or XML conversion while your company specializes in widgets.

Eliminating Uneven Schedules — if you have a job to be done that will take only 10-15 hours a week on some weeks and more or less hours on other weeks, hiring a full-time or even part-time employee is a commitment that you will have trouble keeping. If that employee quits in the middle of a project, you’ll have another problem. It might be easier to outsource the project to a company who specializes in that task and has dozens of people who know exactly how to do it rather than hire your own staff.

Reducing Hiring — hiring and firing is expensive and is an art form that you might not have time to master. If you have a particular job that people are always quitting every two months, it might be easier to have the job outsourced to Manila where they have full-time HR managers to handle the hiring and firing for you! That way you can focus on widgets instead of dealing with people who quit on a whim leaving you high and dry. The outsourced company you hire will have plenty of backups all in the same specialty when the employee assigned to you quits.

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TYPES OF OUTSOURCING ARRANGEMENTS

Freelancers — Some companies hire freelancers which is a type of outsourcing.

Fixed Schedule — Others hire another company for a particular schedule with a contract which extends for a particular number of months or years such as 40 hours a week for two years.

Employee Leasing — Some companies hire a team of workers from an agency which is sometimes called “employee leasing.” Other companies pay for results in specialties like lead generation rather than paying for particular hours of work.

Assignment Based — Programming or software development outsourcing often has a company pay for a completed product or for a particular number of hours to do a particular job although there is very rarely a deadline.

On Call — Some outsourcing is on an on call basis. Programmers might be hire to fix code only when it breaks or to do programming work as needed. Call centers might have a small assignment from time to time only when needed.

ITES — Information Technology Enabled Services which could include data entry using computers, web design, technical support, or other tasks which involve technology to facilitate the task in some type of a way.

KPO — Knowledge Process Outsourcing is also a bype of Business Process Outsourcing that includes tasks that require a higher level of education, knowledge or skills such as Accounting, Software Development, Research, etc.

RPO — Research Process Outsourcing or Recruitment Process Outsourcing. Research outsourcing is popular in Bangalore, India as there are many companies that offer market research, web research, and Pharmaceutical research. RPO could also be a form of human resources outsourcing where an outside company will help you find employees or leased agents. This is by far the least popular form of international outsourcing as there are few providers who offer overseas assistance with recruitment.

HRO — Human Resources Outsourcing as mentioned above is the least popular form of international outsourcing as there are very few overseas companies who offer competent service in this industry. However, there are a few companies in India and the Philippines that allow you to lease call center agents and programmers at low rates. However, the quality of such help is dubious and not guaranteed in any way by the provider company.

MBPO — Medical Business Process Outsourcing includes outsourcing of Medical Billing, coding and Medical Transcription. Quality standards and billing in these fields is a lot more uniform than in other BPO tasks as companies can charge a percentage in Medical Billing and can offer rates per number of characters or words (or lines) in Medical Transcriptions. Quality standards are also easy to measure as there are international standards for Medical Billing and Medical Transcription. You can measure errors as a percentage rate. If a company makes more than a particular fraction of a percent of errors, they generally go out of business or get fired.

Social Media tasks might include article writing, proofreading, posting on Facebook, managing a Twitter account, LinkedIn, Instagram, Pinterest, or any of the other common social media platforms. Most companies specialize in several social media platforms, but cannot provide service for ones they are not familiar with or don’t have sufficient staff for.

(1) To obtain services from an outside or foreign supplier in place of an internal source.
(2) To contract work to an outside firm or abroad.
(3) To assign particular specialized and/or repetitive tasks that are not core competencies of the mother company
to an outside or foreign company.
(4) To procure back office services with an outside supplier or provider.

Explanation
BPO Outsourcing is becoming more and more popular as companies have to fight harder to survive in a world where margins are getting tighter by the day. If a company is doing a particular task even slightly less efficiently than the competition, they will lose profits and market share in the long run. One solution available which may or may not increase efficiency is to outsource particular tasks to a company that specializes in those particular tasks. For example, if your company focuses on widget production, but 10% of your labor resources are devoted to reminder calls, it might make sense to focus more on widgets, and outsource the reminder calls to Manila where there are companies who specialize in all aspects of the call center business. Knowledge intensive tasks are also more and more commonly outsourced to KPO and LPO companies who specialize in knowledge process outsourcing and legal process outsourcing.

Outsourced — the TV show
Outsourced is also an American television sitcom filmed in Los Angeles that was set in an Indian Workplace fictionally located in Mumbai, India. A catalog based company selling American novelty goods such as whoopee cushions, foam fingers, and wallets made of bacon hires Todd Dempsy from Kansas to relocated to Bombay. Every episode of this hillarious comedy focuses around Todd’s culture shock dealing with Indians and attempting to teach the local Mumbai staff all about American sensibilities and culture.

See our comprehensive definition of — outsourcing — which goes over when and why outsourcing is done, types of outsourcing arrangements (freelance, contract, staff leasing), a detailed look at categorizations of outsourced tasks (BPO, KPO, LPO) as well as a detailed look at 55+ commonly outsourced specialties in the call center, data entry, software and other outsourcing industries.

Why do people outsource anyway? Approximately 46% of companies that outsource say they do it in order to save money. For example, in the Philippines, you can get a call center to do a 3-minute outbound call for about $12 an hour; in India, it will cost you about the same once you add in set up charges and find a place where you will have competent and intelligent English-speaking callers; in the Caribbean, it will cost you $15; in South Africa, it will cost between $11 and $16 per hour. But will outsourcing solve your problem if you depend on quality and callers you can trust?

Many firms actually outsource because, in some industries, American companies are too busy to take on new clients or give enough time to clients…and the combination of high prices, inflated American egos, slipshod workmanship, and bad attitudes is too much to palate. Has outsourcing solved these problems? Are workers in other countries more humble, more careful, more diligent, or more polished? Finally, some CEOs may outsource because they have an affinity for the culture (it might be their country of origin, they might have lived there for a time, or they might belong to a religious group that has a presence there) and may choose to give work to that country. For whatever reason, according to one source, outsourcing grew by more than 40% between 2001 and 2009. More than 2 million jobs were outsourced by the U.S. in 2011 alone (a conservative number); however, the numbers are deceptive, and do not include jobs in companies that actually built factories, offices, and call centers in other countries. In that same year, 2011, 53% of U.S. manufacturing companies, 43% of U.S. IT companies, and at least 15% of call centers had “a large portion” (75%?) of their work done outside the U.S. Add to that reports that show, for instance, that Russia’s income from taking on IT outsourcing doubles every year, and we now have an idea of the volume of jobs being outsourced by the U.S.

The reality of outsourcing, however, is that communication is never as good as it might be. Americans have higher standards for communication than other cultures, and it is like driving 40 miles an hour into a brick wall when you discover how low or non-existent the communication standards are compared to yours…or you find out that your “senior programmer” has only six months’ experience…or when, every time you call to find out “what’s going on,” you are put on hold and then the phone disconnects while you are on hold…or when you generally discover how incompetent, inexperienced and slow are the “excellent” staff who have been randomly assigned to your project.
Many U.S. companies that have tried outsourcing in the past few years are now looking for alternatives: in the end, they found that they did not save money but lost money because of jobs not completed or not done according to high work standards. Even though this may have been simply a result of not getting to know the company well enough or not finding the right fit, many companies in the U.S. are now wondering where to find competent, affordable help. Look no further, ya’ll: just mosey on down south of the Mason-Dixon line. In the U.S., the good ole South may be the place to do business.

In our experience, Southerners have an easy manner and a politeness that goes a long way. They try to make you feel comfortable, and will try to come up with solutions that work for everyone. Second, in the IT industry, for example, they have a great work ethic, and take pride in doing a great job. In the South, because the cost of utilities is less and wages are lower than in other parts of the country, “insourcing” is worth looking into. Office space in some parts of the South is as low as $1 a square foot, so companies can afford to work in an office and have a professional staff on board… whereas on the West Coast, for instance, where office space can be $5 a square foot for a modest office, many IT companies have virtual offices or a loosely monitored team of “experts” who claim to have known each other for over a decade but never meet in the office to collaborate and don’t really work for the company. IT developers, for example, are often independent contractors who are not interested in “your dumb project” and are not held to any standards. In this type of company, the business manager is at the mercy of the programmer and really has little control over which clients are accepted and whether or not work gets done or even started at all.

But it’s not like that in the South, ya’ll. It is not hard to find real offices with real employees, a manager who tries to get things done fast…but is likely to be good-natured and may want to go at a slightly more relaxed pace just to get to know you and find out what you really want. Statistically, not only is the price of office space less per square foot in the South, but the cost of labor is less. Although it is still more expensive than outsourcing to India, the superior communication and effort are well worth the difference. Doing business with the most expensive companies in India costs only a bit less than doing business with the South–but the communication and productivity will be a lot better in the U.S.–not to mention the time-zone factor. If you compare the least expensive parts of India to the least expensive part of the U.S. (the South), the U.S. comes out on top. If you look at the relative costs of doing business with India and California, the cost of doing business in the South may be the perfect solution.

For example, South Carolina is among 10 states with the lowest cost of labor in the U.S.–yet is ranked among the top 10 states in terms of business environment. Compare these rates, for example: India, $30 an hour (IT) for a senior developer…but the work often seems to take double the time; $75 an hour (IT) for a senior developer in the South…while in CA, you may pay $150 an hour for roughly the same quality developers. If you are talking about call centers, in Charleston, SC, for example, it is possible to find a call center that will do outbound calls for $25 an hour and will create extremely flexible terms. This is not only less than NY or CA prices ($35-45 an hour for the same number of calls and information), but is better quality–and a better deal, call for call–than call centers overseas that will cost you approximately $15 an hour.

Why? Because it’s not just about the rate they quote you. One of the first things you will find out is that some companies will not guarantee that they will “penetrate” the entire list for this money, and it seems that the level of commitment and feedback on the part of the callers is not as great at that of their U.S. counterparts in the South. In addition, many Americans have been turned off by calls from overseas call centers, particularly when Americans need the caller to inform or explain or reassure. In fact, although there is as of yet no official law requiring foreign call centers to forward calls to a representative in the U.S. if asked, many U.S. citizens have made this request and many companies have a policy of transferring calls to U.S. operators when asked to. And these requests have become more and more frequent in the past few years. Americans are also uncomfortable with the loss of call center jobs to foreign countries. Looking at these issues, many companies have chosen to insource calls to places like the U.S. South.

In 2013, many U.S. companies are already discovering the virtues of “insourcing” and are bringing call center work back to the U.S. Wages of call center employees in many other countries go up as much as 15 or 20% a year; this plus communication issues, security/ privacy issues, poor workforce training, and time-zone issues have made many companies reconsider outsourcing to India or other overseas destinations. According to one report, in 2013, given all the hidden costs of obtaining competent callers, it is about 15% cheaper to use a call center in the South than one overseas. At one point in the last few years, 30% of call center jobs in the U.S. were sent overseas, but now, in 2013, only about 10-12% of calls are made by call centers outside the U.S., according to one source.
These and other factors make the South worth exploring if you want to “insource” to a U.S. company that can take over a portion of your IT or call center workload.

Have you ever hired a BPO outsourcing company to do anything for you? You are always kept waiting and waiting. You never get any feedback unless you pester them to just let you know — “What is going on?” This is not friendly behavior, and certainly doesn’t help their business grow. Larger companies are rarely interested in providing outsourcing services to smaller companies, and larger companies are the only ones who have a chance to figure out how to be efficient.

But, what if there were a company that could deliver convenient outsourced services like web design, custom programming, call center, and other tasks — without all of the headache. I would pay a lot more for the convenience, wouldn’t you? Imagine a company that has no service contract. You just tell them what you want — and they do it. What if you wanted a website, you talked to the rep, you went over specifications, they sent you an email, you okayed it, and 20 minutes later, you got a layout. In the real world this is not possible, but in the world of “drive-through” outsourcing, it is! Let’s keep an open mind. Let’s be creative. If someone wants an idea to happen, it happens. The only reason it doesn’t happen is because people don’t care enough about it.

Let’s say you need an assistant to help you when you need it. Let’s say you send specifications over for 20 hours of call center work. You send the script, and instructions. Imagine that the next day it was done. Imagine that you get a confirmation email explaining who the project manager is, who the callers are, and when they will be doing the call. Three ladies were assigned the work and got it done in less than one day. Unbelievable. If a company wants to have streamlined outsourcing services, it is possible. It is all about having the dream!

Having a very well organized outsourcing company structure and a very flexible labor force would make it possible to attain this type of fast results. You might have to charge a bit more too, since there would be down time when there weren’t any last minute projects. Or perhaps there could be some non-time-sensitive projects mixed in with the last minute work being billed at different rates! Create your own billing structure — be creative.

I like living a dream. My lifestyle is something I created. I work from home (and work too much). I travel on a whim. I provide fast service to my clients (usually), and work with cool writers and psychics. Pretty cool, huh? This lifestyle is possible because I:
(1) Thought it was possible
(2) Worked to attain my goal
(3) Was creative and innovative, plus flexible
(4) Work far too much.

I wrote a previous blog article about being aware in business. You really need to be a Zen Monk to be good at business. You need to have a still and watchful mind that notices everything. You need to notice behavioral traits in others. If you can spot bad behavior or signs of risky character traits in others EARLY, then you can save yourself a lot of grief in business. But, what I have been thinking about recently is more tactical.

Multiple approaches to getting tasks accomplished
Let’s say that you have a particular set of tasks or BPO business processes to do. You might have one way of doing those tasks. Perhaps there might be other ways of doing those tasks that you thought of. But, what if you meditate on this business process and come up with ten ways to approach the tasks at hand? The issue is that in business, your workload varies over time, and your labor resources vary too. It is expensive in terms of time to interview lots of people just to fill one position, and then potentially have that person quit or get fired. One interesting way to solve this situation is to have a “fluid system” for business process outsourcing (BPO Outsourcing).

What if you have what I could term as a BPO overflow tank?
Your car has an overflow container for radiator fluids, why doesn’t your business? Let’s say that you handle most of your work in house, but you always have a certain percentage of particular tasks outsourced to a BPO company. Let’s say that according to your business model, 20-70% of your outgoing call work is outsourced, and the rest is done in house. That buys you tremendous flexibility. The outsourced call center work might cost you more in labor, but you don’t need to interview people, etc. That buys you time. You can delay your interviews until you have more time in your management schedule. You can be more selective about who you hire. You can fire someone more easily who is not capable or who is slacking off. Having a reliable, tried and tested overflow system for handling your business processes is a great idea. Keeping that system always running ensures that it will run more reliably as well.

There are other solutions too.
If you want to outsource call center work, there are auto-call systems that you can use online that can send messages to clients. You can have a mass email system to communicate with mass amounts of clients. You can even auto-text them. You could devise a system where you would reduce the quantity of outgoing calls under certain business circumstances so you could gracefully adjust to changing workloads. Managing labor resources is fascinating and more complicated than you think! So, try to increase your awareness and think of more innovative ways you can solve problems. Write these solutions down and compare them. Don’t be afraid to use more than one system simultaneously!

This is a common theme in India, where highly skill employees are a commodity that companies will die for — or poach for. One of the recent episodes of the television comedy “Outsourced” was based on the theme of poaching call center employees. Someone got laid off at the call center, and someone new needed to be hired. There was a line of two-hundred people, but only one was well qualified, and was hired immediately. This new employee was of Indian ancestry, but grew up in Texas and understood the American culture and American expressions well which made him a dream employee. Unfortunately the girlfriend of the manager of the call center also liked this new employee and offered him double the salary. The manager, Todd, who first hired this Texas raised dream call center employee decided to get even. Todd and his friend, a manager from American Hunter, found a way to get into his girlfriend’s office, find the resume and salary information for the new employee, and forwarded it to another fancy company who was in the same building. The fancy company who had very well trained workers who showed up in suits and had snooty attitudes quickly swallowed this new employee and got him in uniform immediately — a suit and a mobile phone which is permanently glued to his ear.

Outsourced is America’s most interesting and endearing television comedy, but the theme of poaching employees is a nightmare for Indian bosses. India’s economy is growing so fast, that employees are getting better and better offers by the day. Its common in places like Bangalore and Mumbai for employees to jump from company to company. If they have a job at one company in Koramangala at a particular salary, they might jump to another company in Whitefield because they have a nicer looking office, better benefits, or nicer females working there. If you heard the reasons why employees jump boat in this employees market, your jaw would drop.

It is expensive to interview, hire, and train new employees. If an employee is so bad they need to be fired, or jumps boat prematurely, this causes a huge loss to the boss. It makes more sense for the boss to think ahead. If you hire someone good, its like having a really good looking girlfriend. You will not be the only one who likes her, and your offer is not likely to be the best offer either. If the girl is not the loyal type, and girls these days rarely are, then she will quickly wander off with some guy who offers her more. It makes sense to pamper a good employee.

Get to know them? Sure! If you get to know a good employee, and develop a good personal relationship with them, they will feel happier in that environment and be more likley to stay. This is true with customers too. It pays to get to know your customers. Don’t spend all day with them, but a simple phone call makes all the difference. Give them some freedom. If your star employee needs to have a dental appointment during business hours, let them go! Just have them make up the hours some other time. As long as they are on schedule, let them work from home a day or two per week two. Find out what they like, and cater to them. It might take a bit of research, but its easier than hiring someone new which costs lakhs in lost productivity! Giving raises every three months makes sense too. Having regular evaluations costs money, but is cheaper than losing employees to poachers. Or, giving employees an incentive plan giving them a percentage of their output. If the market is growing fast, their percentage will grow fast too.

Caring for your star employees will reduce poaching by leaps and bounds. People today are obsessed with numbers and overworking. This is important. But, caring about relationships is even more important. Business is based on relationships. People will spend money on a service provider they know and trust. Nobody wants to do business with a stranger in any country. People want to leave business relationships where the personal relationship is not good. Emotions speak louder than rupees.

The authoritarian culture. India and Arab countries have a very authoritarian culture. Bosses often like to treat their employees as lesser and employees traditionally have to bow down to their employers. As an American, I think that class and position is overemphasized in India. It seems like it would be more helpful if less emphasis was put on position, and bosses treated their star employees with the same care they might a family member. I am by no means suggesting that the boss let the employee run all over them, but a caring attitude without compromising authority seems like a super idea to me!

This is my sense of humor I guess. My favorite show is Outsourced which takes a deeper look at the many issues effecting the lives of call center workers in India as well as Americans living in India. I relate to this because I have spent many months in India and have gone through all of the cultural issues, dyssentary, monsoons, etc.

My skit idea is that the manager of an Indian call center named John wants his employees to become more comfortable with the American culture, so he calls America and asks his manager what to do. The senior manager, Chuck in California says that they should do things like Americans do. Have an office party once in a while, have casual Friday, have personal days, and do as many things as they can like people do in America.

So, John decides to have casual Friday. I am thinking of Rajiv Gidwani from Outsourced reluctantly saying, “Okay workers, listen up… today we will be having casual Friday, I personally don’t like the idea, but I was talked into it by our senior manager”. The real life Rajiv hates anything casual and loves the corporate power image with suits and formality. So, John tells the workers, that they can dress how they like: in jeans or casual clothing, and that they can even bring their animals to work, since thats what many companies in California allow! In California, in some of the film industry offices, people will bring dogs to work for example.

Finally, casual Friday comes after a long 96 hours of waiting!
Anita brings her Chihuahua. Naren brings his pet rat. Girish brings a baby cat. Manish brings a peacock. Sanjiv brings a monkey. Santosh brings a cow. And Nuntheny brings the baby elephant from aunty’s temple down the street. John says, I’m so happy that you are adapting to our American ways. It makes much more relaxing atmosphere when you bring your pets, doesn’t it? The workers agree.

But, John becomes disturbed at the type of animals that were brought in. They don’t seem like “pets”.
John: Anita, I love your little dog, he is so cute…., but Naren.. a rat? A rat is not a pet.
Naren: For me its a pet. We have so many of them in India and they are so cute with their little beady eyes.
John: A peacock? Don’t those belong outside? Don’t they make this loud hooping sound any time there is noise?
Manish: Oh, he is our family pet, and after all, today is casual Friday, so we must bring our pets. I love Sally my peacock. Sally… don’t listen to what John has to say, he doesn’t understand you!
John: Sanjiv, I love your monkey, but monkeys are mischevious animals.
Sanjiv: No, not my monkey, he is wonderful. He never misbehaves. By the way John? That banana on your desk? Its not going to last long, better put it in a drawer.
John: Nuntheny, I love your mini elephant. He is so….
Nuntheny: He? He… is NOT a he… its a She
John: Oh, I’m sorry.
Nuntheny: You should be! How would you like it if people mistook you for a lady? There there Laxmi, John didn’t really mean what he said. You’re a real lady… here…have a banana… Good girl.
John: Hmmm, this attempt at learning American culture is not working out as I expected. I was thinking more along the lines of dogs and maybe a cat here or there. Perhaps a hampster.
Nuntheny: Well, in India we have different types of pets.
John: Anyway, break is over its time for work.
—— TRUMPET sound…. MOOOOOO…. woof ..woof…woof. hoo-hoo-hoo-hoo-hoo-hoo-hoo…

John calling Chuck: Chuck… these Americanization ideas like casual Friday?
Chuck: How is it going? I love casual Friday
John: It’s not working as planned. When they are making calls, they can’t hear the customers with all the trumpeting sounds of the elephant, the moo sounds, and the peacock starts hooting every time there is a sudden sound.
Chuck: Oh my god, it sounds like a zoo!
John: Yes, thats the word I was looking for.
Chuck: Hmmm. Lets change the plan a bit. We’ll have Sari Thursdays and Jeans Fridays. That way we can have the best of both cultures without all of the sound effects.
John: Yes Chuck (trumpet sound of elephant), I am hearing you (bark bark)… trying to hear you…I’m not sure how good I would look in a sari though. Thats my only concern.
Chuck: Don’t worry John, ONE SIZE FITS ALL!!!!